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Why Sustainability Needs A Balanced Approach

By Mike Rosenberg, professor of Strategic Management at IESE Business School

As the global economy continues its slow recovery, business leaders have been turning their attention away from fire-fighting to deciding how to develop their organizations over the medium and long term, on an increasingly global scale.

A quick example of the pace of globalization is my own teaching schedule – in just the last four months I have been to São Paulo, Moscow, Shanghai and New York, as well as Barcelona (the home of our full time MBA program.) One idea that I´ve found over these months is increasing attention to the idea that business strategy must be developed and deployed in a way that takes into account the local and global political realities as well as the broader issue of sustainability.

I call this idea Doing Business on the Earth, and it has to do with finding a balanced approach to sustainability, globalization and strategy not for some altruistic motivation but in order to assure the highest medium and long term return to shareholders.

Different Pressures: Austerity At Home, Investment Abroad

Many firms today are living in a schizophrenic period. On the one hand, some of their largest and most profitable markets face sluggish demand and intense competition, requiring constant innovation coupled with relentless cost cutting. The men and women running these businesses are growing increasingly exhausted as the crisis has given way to a “new normal” of austerity and pressure. At the other extreme, these same companies are investing hundreds of millions of dollars to acquire or grow positions in emerging markets – which may be years away from showing significant profits. Managers in these markets are under equal but different pressure to achieve scale, market share and eventually start making money.

There are, of course, enormous political and geopolitical risks in doing business in many countries and regions around the world, but the need to grow, and the difficulty to do so in the developed world, makes such investments a strategic imperative. To add to the complexity, stakeholders in the west are increasingly asking companies to go beyond compliance in their approach to environmental sustainability and social issues within all the countries in which they operate, making it even harder to compete with local competition.

In my view, the key to dealing with this complexity is to embrace it at the highest level; grind through the cost benefit analysis on a case by case basis to determine the best course of action in the short, medium and long term.

The View From Tomorrow

What I find most encouraging, is that our full time MBA students, who come from 55 different countries this year, are deeply passionate about finding a way to contribute to and enjoy the benefits of the global economy while also making a positive contribution to the world and society. This February they will hold the 11th annual “Doing Good, Doing Well” conference in Barcelona which focuses on exactly this issue and will have a number of keynote speeches, workshops and panel discussions. I understand, it´s the leading student-run event on these topics in Europe!

One speaker I´m particularly pleased to see in the line-up is Bjorn Lomborg, a controversial economist who wrote The Skeptical Environmentalist. As founder of the Copenhagen Consensus, Lomborg argues for a fact based approach to solving global problems by focusing on exactly the kind of cost benefit analysis that is also needed at the corporate level.

These students, mostly men and women in their late 20s, and their peers at other business schools will be the leaders of the business community in the years ahead. The fact that they are already taking the long view is setting an example for the rest of us!

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